Excerpt:contract act (ix of 1872), sections 172, 173, 176 and 178--'pledge' of moveables nature of security--government securities, pledge of--endorsement--remedy of pawnee. - .....time to get a share in the government securities which stood in the joint names of himself and his brothers. government securities are by the statute neither negotiable nor transferable without endorsement on the back by the transferor. there was no such endorsement made by the defendant. from exhibits d and e it is quite clear that demands were being made for payment of the advance without any effect. the defendant was clearly told by karuna that he had overdrawn his account and that he should immediately take steps to pay the amount due to his brothers on his pro-notes. the defendant, however, did nothing and this suit had to be instituted, to save his promissory notes being barred. in his written statement the defendant submitted that karuna was an accountable party to him and should.....

Judgment:

1. The plaintiffs and the defendant are brothers. When they and their brother Goti Prokash Nandy, who is not a party to this suit, were all minors, Karuna Nidhan Mukherjee was appointed their guardian by the District Judge of Burdwan. Certain Government securities endorsed in the names of the five brothers came into the hands of Karuna Nidhan as such guardian. The defendant Jyoti Prokash attained his majority about 1901. Their estate, however, remained under the management of Karuna Nidhan who acted as the manager of the defendant and as guardian for his infant brothers. In or about 1909 the defendant wanted money for purchasing a house in Calcutta, but there was not sufficient money in the hands of his manager, in his share of the income, from which the amount could at that time be paid. Karuna thereupon suggested that he could advance Rs. 50,000 from certain Government securities in his hands belonging to the shares of his infant brothers, who are the plaintiffs in this suit, two of whom have since attained majority and the third, still an infant, being represented by Karuna in this suit, It appears that an application was thereupon made by the defendant to the District Judge praying that Karuna Nidhan Mukherjee as such guardian might have permission to grant the defendant a loan of Rs. 50,000 out of the Government papers belonging to his minor brothers. He offered to pay interest at 5 per cent, and stated that he was ready to pledge his share in the ejmali Government securities, meaning the Government papers which stood in the joint names of himself and his brothers, and also his share in the ejmali ornaments as security for the said advance. The ornaments were at that time in a room to which locks had been separately put by Karuna and himself, Karuna also represented to the Judge that the defendant had proposed to pledge as security for the said debt his share in the Government securities left by his father. He stated that he had originally in his hands, Rs. 8,20,000 in Government securities which stood in the joint names of the defendant and his brothers and that the defendant's share in the said Government securities was Rs. 64,000, but as the defendant had drawn out Rs. 13,000 which had been previously separated from the ejmali account and transferred to his separate, share, the defendant had at that time a right to receive Government securities of the value of Rs. 51,000 only on account of his share. The Judge thereupon made an order to this effect: 'The guardian personally applied to me for permission to lend Rs. 50,000 to the elder brother of the minors Lala Jyoti Prokash Nandy. The conditions of the loan to be as follows: Lala Jyoti Prokash Nandy will take Government pro - notes to the face value of Rs. 50,000 bearing interest at 3 1/2 per cent. He will pay interest at 5 per cent on Rs. 50,000 and will execute a hand-note for that amount. He will also pledge his share in the Government pro-notes belonging to his estate which amounts to Rs. 51,000 and his l/5th share in the ornaments left by his father. The notes and ornaments pledged will remain with his guardian. The loan is to be re-paid by transfer of Government pro-notes to the face value of Rs. 50,000 bearing interest at 3 1/2 per cent. A time for re-payment should, in my opinion, be fixed on the above conditions. The loan proposed is sanctioned.' The date of re - payment of the loan was subsequently fixed for three years. In accordance with this order Karuna Nidhan Mukerjee as guardian of his infant brothers handed over to the defendant Government securities for Rs. 50,000 belonging to the infants. The defendant's case as regards the arrangement about re-payment is set out in paragraph 5 of the written statement Clause (f) (I to IV). It is admitted that the jewellery which was to have been pledged remained under their joint lock and key and was never delivered to Karuna. It has also been shown that a portion of the ejmali Government securities was subsequently pledged by the defendant with the Bank of Bengal, and sold to pay off the debt due to the Bank. The defendant's share in the Government securities is said to be not now in existence. In 1909 he had a right to receive pro-notes of the nominal value of Rs. 51,000 in his share, but no papers, were specifically allotted to his share or kept apart Karuna stated in his evidence that the defendant spent his share of the ejmali Government securities which were gradually purchased by the minors and the cash value was taken by the defendant from time to time, and that finally under orders of the District Judge all the Government securities were endorsed over to the minors according to the account Which Karuna had submitted to the district Judge. He also stated that the defendant used to take his share of the income of the ejmali estate and had overdrawn his account. The estate when under Karuna was kept joint and a joint jamakharach was kept by him. Karuna said that he had agreed to lend to the defendant as guardian of the minors 'in the idea that the defendant would not be able to get his share separated before the re-payment of the amount advanced by him on behalf of the minors', but that the defendant had drawn out the value as aforesaid. No specific Government securities were pledged by the defendant. None were set apart. Except signing, a pro-note for Rs. 50,000 the defendant did not do anything further. He had merely a right at that time to get a share in the Government securities which stood in the joint names of himself and his brothers. Government securities are by the Statute neither negotiable nor transferable without endorsement on the back by the transferor. There was no such endorsement made by the defendant. From Exhibits D and E it is quite clear that demands were being made for payment of the advance without any effect. The defendant was clearly told by Karuna that he had overdrawn his account and that he should immediately take steps to pay the amount due to his brothers on his pro-notes. The defendant, however, did nothing and this suit had to be instituted, to save his promissory notes being barred. In his written statement the defendant submitted that Karuna was an accountable party to him and should be made a party to this suit in his personal capacity, and further that this suit could not be adequately adjudicated upon without an account of the whole management of the joint estate by Karuna both for the period during which the defendant' was a minor and for the period subsequent there to during which Karuna continued as manager of the defendant and guardian of his minor brothers. (See paragraph 14 of the written statement). It is stated in the petition that the defendant's share was to be pledged and the Judge directed it to be pledged, but no document was then executed. There was no formal handing over of any securities to Karuna. They were already in the custody of Karuna and remained in his custody. It has been proved that subsequently the defendant took out a portion of the ejmali Government securities and pledged them with the Bank of Bengal. It is admitted that no pledge of the defendant's share in the ejmali ornaments was effected. Can it be said that there was an effective pledge of his share of the securities? He dealt with his share in them as if it was his own. It may be that Karuna ought not to have permitted him to deal with them before the amount due to his wards had been paid. But we are not concerned in this case with any breach of duty Karuna may have committed. The defendant knows that he has overdrawn his share of the joint income and we believe he knows fully well what has happened to his share of the Government securities. His denial we are not prepared to accept. He has not scrupled to make a charge that the endorsements of payments of certain sums appearing on the pro-notes are false. The learned Judge has correctly found them to be genuine. The defendant pretends that he does not know how his account in the ejmali estate stands. He had ample opportunity of knowing it and the circumstances indicate that he must have known it. But we have nothing to do with these accounts. The learned Judge has correctly held that he is not entitled to have the accounts taken in this suit as submitted by him in his written statement. It is submitted before us that in any event the defendant is entitled to have an account taken of the manager's dealings, with these joint Government securities. This was not originally asked for, but it seems to us to be an indirect method of having the whole of the account taken. The learned Judge has, in our view, correctly held that the plaintiffs are entitled to have their remedy on the pro-notes independently of the alleged pledge under the provisions of Section 176, Contract Act. Section 172, Contract Act, defines a pledge. It is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the pawnee. Here it cannot be said that there was any actual delivery. It is very doubtful whether there was a constructive delivery in this case. It may be said that the intention was to create a charge on the defendant's share, which is not the same thing as effecting a pledge. A pawn is not an equitable mortgage. It is a security intermediate between a simple loan and a mortgage which wholly passes property in the thing conveyed. See Carter v. Wake (1876) 4 Ch. D. 605 : 46 L.J. Ch. 841; Backhouse v. Charlton (1878) 8 Ch. D. 444 : 26 W.R. 504; In re Richardson; Shillito v. Hobson (1885) 30 Ch. D. 396 : 55 L.J. Ch. 741 : 53 L.T. 746 : 34 W.R. 286; Halliday v. Holgate (1867) 3 Ex. 299 : 37 L.J. Ex. 174 : 18 L.T. 656 : 17 W.R. 13. Section 176 gives a clear right to the pawnee to institute a suit independently of the pawn, and we think the learned Judge is right in the view he has taken. Section 172 of the Contract Act deals with 'goods.' Certain classes of documents are specifically referred to in Section 178 which do not include Government securities.' It is difficult to apply the law relating to pawns as contained in the Contract Act to pledges of all classes of documents. Take the case of title-deeds. What can the pawnee sell? There is no equitable mortgage even created by their delivery or deposit as collateral security outside Presidency Towns. They may be 'goods' in the sense of being pieces of parchment or paper, but what value are they as such? Mere delivery of Government securities gives no property in them for the purpose of negotiation or sale, without endorsement. Government securities standing in the names of five persons, as in this case, require the endorsement of four of them in favour of the fifth effectively to vest the property in them to him. In the case of Nim Chand Baboo v. Jagabundhu Ghose 22 C. 21 at p. 23 it was held that when moveable property is pledged to a person for money lent, he acquires a special property therein, and he is entitled, under Section 176, Contract Act, either to bring a suit against the owner upon the debt or promise, retaining the goods pledged as collateral security, or he may sell the things pledged upon giving reasonable notice of the sale. Mahalinga Nadar v. Ganapathi Subbien 27 M. 528 : 13 M.L.J. 445 followed the Calcutta case and held that both rights existed and were concurrent rights. Nechram Dobay v. Bank of Bengal 19 I.A. 60 : 19 C. 322 was a case of a pledge of Government securities, but it is well known that such pledges to a Bank are created by endorsement and delivery.

2. There is nothing to prevent the defendant from asking for an account against the manager for his dealings with his estate, but we do not think we can allow such an account, even in respect of the Government securities, being taken in this suit.